Economics Project Topics

Income Elasticity of Health Expenditures in Nigeria and the Role of Financial Protection

Income Elasticity of Health Expenditures in Nigeria and the Role of Financial Protection

Income Elasticity of Health Expenditures in Nigeria and the Role of Financial Protection

Chapter One

Objectives of the Study

The study aims to achieve the following specific objectives:

  1. To Determine the Income Elasticity of Health Expenditures in Nigeria.
  2. To Identify the Factors Influencing Health Expenditures
  3. To Evaluate the Role of Financial Protection in Health Expenditures



Conceptual Review

Health Expenditures

Within the intricate landscape of health economics, the examination of health expenditures is paramount (Olatubi et al., 2018). The term “health expenditures” encapsulates a multifaceted array of components, spanning both direct and indirect costs intricately linked to the provision and utilization of healthcare services. Direct costs, as primary contributors to health expenditures, involve tangible and immediate expenses incurred during medical care, including hospital fees, physician services, and pharmaceuticals (Bakare & Olubokun, 2021). These expenses form the foundational financial aspects of healthcare transactions in Nigeria.

In contrast, indirect costs, a less conspicuous yet equally significant facet of health expenditures, extend beyond explicit medical expenses (Adelakun, 2021). These encompass various economic implications, such as the financial burden on households, transportation expenses related to accessing healthcare facilities, and the productivity losses resulting from time spent away from work due to illness. The exploration of health expenditures within this context unravels the intricate economic dynamics surrounding healthcare utilization in Nigeria (Abu & Abdullahi, 2020).

By dissecting the direct and indirect dimensions of health expenditures, this section provides a comprehensive understanding of the financial intricacies embedded in the healthcare system. This nuanced comprehension is indispensable for policymakers and stakeholders striving to formulate strategies that holistically address the economic landscape of healthcare services. The interplay between direct and indirect costs underscores the need for targeted interventions that consider the diverse economic implications on individual households and the broader healthcare infrastructure.

 Income Elasticity

The examination of income elasticity within the realm of health economics is paramount, providing crucial insights into the relationship between income levels and health expenditures (Abu & Abdullahi, 2020). Income elasticity, a key economic concept, measures the responsiveness of health expenditures to changes in income, offering valuable insights into the financial dynamics of healthcare utilization. In the context of developing countries like Nigeria, where economic disparities are pronounced, understanding income elasticity becomes especially pertinent for crafting targeted health policies.

Income elasticity serves as a metric to gauge how shifts in income influence the demand for healthcare services, shedding light on the affordability and accessibility of healthcare (Bakare & Olubokun, 2021). In developing countries, where resource allocation is often constrained, comprehending the nuances of income elasticity is pivotal for policymakers. This investigation aims to unravel the intricacies of how income fluctuations impact health expenditures in Nigeria, providing a nuanced understanding of the economic dimensions that influence healthcare-seeking behaviour.

By focusing on income elasticity within a developing country context, this section seeks to contribute to the broader discourse on health economics. It acknowledges the unique challenges and opportunities inherent in healthcare dynamics in nations like Nigeria and underscores the importance of tailoring health policies to the specific economic conditions of the population. The insights derived from this exploration will not only enhance the theoretical understanding of income elasticity but will also have practical implications for policymakers striving to optimize healthcare resource allocation in developing economies.

 Developing Country Context

Delving into the healthcare landscape of developing nations, particularly Nigeria, unveils a tapestry of unique characteristics and challenges (Oisaozoje & Opusunju, 2016). The context of developing countries introduces distinct intricacies, marked by constrained resources, infrastructural limitations, and a high burden of communicable and non-communicable diseases. Understanding the nuances of the healthcare system in this specific context is essential for crafting policies that address the diverse needs of the population.

In Nigeria, a developing nation grappling with a myriad of health challenges, the healthcare landscape is characterized by a complex interplay of socioeconomic factors (Adelakun, 2021). Limited access to healthcare facilities, especially in rural areas, coupled with disparities in healthcare infrastructure, poses substantial challenges to effective healthcare delivery. The burden of infectious diseases, such as malaria and tuberculosis, coexists with the rising prevalence of non-communicable diseases, adding layers of complexity to the healthcare paradigm.

This section aims to unravel the unique characteristics of the healthcare landscape in Nigeria within the broader framework of developing nations. By shedding light on the challenges specific to these contexts, it contributes to a nuanced understanding of the factors influencing health expenditures and healthcare outcomes. The insights gleaned will be instrumental for policymakers, international organizations, and stakeholders in tailoring interventions that address the distinct needs of developing countries, ultimately striving for a more equitable and effective healthcare system.




 Introduction Research

This chapter outlines the methodology employed to investigate the income elasticity of health expenditures in Nigeria and the role of financial protection. The chosen approach aligns with the overarching objectives of this study, aiming to provide a comprehensive understanding of the relationship between income levels and healthcare spending patterns. Drawing on a mix of quantitative and qualitative methods, the research design integrates principles from established research philosophies and approaches.

 Research Design

A quantitative survey research design was chosen as the methodological framework for this study, aiming to systematically collect data from a substantial sample of respondents. This design aligns with the study’s overarching goal of quantifying the intricate relationship between income levels and health expenditures. Saunders et al. (2019) emphasize that a survey methodology is particularly well-suited for gathering numerical data, making it instrumental in statistical analysis to derive meaningful insights. The quantitative survey design allows for a structured and standardized approach, ensuring consistency in data collection across a diverse set of respondents.

The selection of a quantitative approach is especially pertinent when delving into the complex dynamics of the income elasticity of health expenditures. Bell et al. (2019) assert that a quantitative method facilitates the measurement of the strength and direction of relationships between variables. In the context of this study, the variables of interest encompass income levels and corresponding health expenditures. A quantitative survey design enables the systematic collection of numerical data on these variables, providing a basis for rigorous statistical analysis. This methodological choice is crucial for uncovering patterns and trends in the data, offering insights into how changes in income levels influence patterns of health expenditure.

Quantitative survey research offers several advantages for studying the income elasticity of health expenditures. The systematic nature of survey design ensures that data is collected uniformly from each participant, minimizing potential biases in responses. This consistency is vital when exploring the multifaceted aspects of income and health expenditures. Furthermore, the numerical data obtained through surveys are conducive to statistical analyses that can reveal correlations, trends, and patterns with a high degree of precision (Saunders et al., 2019). This precision is particularly important when attempting to quantify the income elasticity of health expenditures and draw robust conclusions from the data.

Additionally, the quantitative survey approach provides a structured format for addressing specific research questions related to income levels and health expenditures. The use of closed-ended questions with predefined response categories allows for efficient data processing and analysis. This design facilitates the categorization of responses, making it feasible to quantify relationships and draw statistical inferences. By employing this methodological approach, the study aims to contribute to the existing body of knowledge on the income elasticity of health expenditures in a systematic and statistically robust manner.

In sum, the adoption of a quantitative survey research design is a deliberate and justified choice for this study. This methodological approach, as advocated by Saunders et al. (2019) and Bell et al. (2019), aligns with the study’s objective of quantifying the relationship between income levels and health expenditures. The systematic data collection process, structured questionnaire design, and the numerical nature of the data obtained through surveys all contribute to the rigour and reliability of the study. This methodological framework ensures that the investigation into the income elasticity of health expenditures is conducted with precision, providing a foundation for meaningful insights and contributing to the empirical understanding of this critical aspect of healthcare economics.

Population of the study

The population of the study encompasses residents of various income groups in Nigeria. The choice of this population aligns with understanding how income levels influence health expenditures across diverse socioeconomic backgrounds. A target population of 1200 respondents was deemed appropriate to ensure adequate representation from different income strata and enhance the generalizability of findings to the broader Nigerian population. This number strikes a balance between statistical significance and practical feasibility, allowing for robust analyses without compromising the depth of insights (Creswell & Creswell, 2018).



Data Analysis

Data Presentation




Summary of Findings

The comprehensive analysis of survey responses in this study has yielded insightful findings, shedding light on the intricate dynamics of income levels, government interventions, and healthcare expenditures within the Nigerian context. The study, driven by a quantitative survey research design, aimed to unravel the income elasticity of health expenditures and discern the influencing factors, with a specific emphasis on the efficacy of financial protection mechanisms. A diverse sample of 104 participants provided nuanced perspectives through structured questionnaires, revealing a rich tapestry of opinions and beliefs.

One of the central findings revolves around participants’ perceptions of the relationship between income and healthcare spending, as depicted in Table 4.7. A substantial 67.3% of respondents either strongly agreed or agreed that the amount of money they earn significantly influences their healthcare expenditure. This highlights a widespread recognition among participants that income is a pivotal determinant of their ability to access and afford healthcare services. The inclusion of categories for uncertainty and disagreement in responses adds granularity, showcasing the diverse spectrum of perspectives on this crucial aspect of health economics.

Table 4.8 delves into participants’ beliefs about the accessibility of quality healthcare services based on income levels. A noteworthy 73.1% of respondents either strongly agreed or agreed that people with higher incomes generally have better access to quality healthcare services in Nigeria. This finding underscores a prevailing acknowledgement of existing disparities in healthcare accessibility linked to income differentials. The inclusion of uncertainty and disagreement categories in responses emphasizes the complexity of this issue, capturing the diversity of opinions among participants.

Table 4.9 explores participants’ perceptions of the differences in health expenditure patterns between individuals with low and high incomes in Nigeria. A significant 68.3% of respondents either strongly agreed or agreed that there is a noticeable difference in health expenditure patterns based on income levels. This result highlights an acute awareness among participants of the existing disparities in how healthcare expenses are distributed across different income groups. The inclusion of uncertainty and disagreement categories adds depth to the analysis, revealing variations in individual perspectives on this critical aspect of health economics.

Transitioning to the second segment of findings, Tables 4.10 to 4.12 provide insights into participants’ opinions on the role of financial protection mechanisms in mitigating the economic burden of healthcare costs. Table 4.10 indicates a striking 77.9% agreement among respondents that having health insurance significantly reduces the financial burden of healthcare expenses for individuals with low incomes. This finding underscores the perceived efficacy of health insurance as a financial safety net, aligning with established literature on the subject.

Table 4.11 explores the perceived role of social assistance programs in ensuring that individuals with low incomes can afford necessary healthcare services. A notable 67.3% of respondents either strongly agreed or agreed with this statement, indicating a prevailing belief in the significance of social assistance programs in enhancing healthcare affordability. The inclusion of uncertainty and disagreement categories allows for a nuanced understanding of the diverse perspectives on the effectiveness of such programs.

Table 4.12 investigates participants’ beliefs about the disadvantage faced by individuals with low incomes in accessing quality healthcare without adequate financial protection mechanisms. A substantial 76.0% of respondents either strongly agreed or agreed with this statement, highlighting a consensus among participants on the vulnerability of low-income individuals in the absence of robust financial protection mechanisms. The inclusion of uncertainty and disagreement categories enriches the analysis by capturing the spectrum of opinions on this critical aspect of healthcare economics.

In conclusion, the findings of this study provide a rich and nuanced understanding of the intricate relationship between income, government interventions, and healthcare expenditures in Nigeria. The study’s outcomes carry implications for policymakers, healthcare practitioners, and researchers, offering valuable insights that can inform evidence-based decision-making. These findings contribute significantly to the ongoing discourse on health economics and pave the way for future research endeavours aimed at fostering equitable and accessible healthcare for all within the Nigerian context.


The results of the hypotheses tested in this study have yielded compelling insights into the dynamics of income levels, government interventions, and healthcare expenditures in Nigeria. The one-sample t-test, conducted with an assumed mean of 0 and a critical table value of 2.92 at a 5% level of significance, led to the rejection of all null hypotheses. This indicates a statistically significant relationship between income levels and health expenditures, as well as the influential role of financial protection mechanisms and various factors in shaping healthcare spending patterns.

The rejection of the null hypotheses suggests that income elasticity plays a substantial role in determining health expenditures in Nigeria. Additionally, participants’ perspectives on the efficacy of financial protection mechanisms, as explored in the research questions, align with the statistical findings. These outcomes underscore the importance of income in shaping individuals’ healthcare behaviours and highlight the need for targeted policies and interventions to address disparities in healthcare access and affordability.

In conclusion, the study’s results emphasize the interconnectedness of income, government interventions, and healthcare expenditures, providing a foundation for evidence-based policymaking and interventions aimed at fostering a more equitable and accessible healthcare landscape in Nigeria. The findings contribute to the existing body of knowledge in health economics, offering valuable insights for researchers, policymakers, and practitioners working towards enhancing healthcare outcomes in the context of economic diversity and dynamic healthcare landscapes.


Based on the findings of this study, the following recommendations were proposed:

  1. Tailored Health Policies: Based on the income disparities identified in this study, policymakers should craft targeted health policies that consider the diverse income levels within the Nigerian population. These policies should address the specific needs of individuals with varying income levels to ensure equitable access to quality healthcare services.
  2. Enhanced Financial Protection Mechanisms: Recognizing the significant impact of financial protection mechanisms on healthcare expenditures, there is a need to strengthen existing mechanisms and explore innovative approaches. Policymakers should consider expanding health insurance coverage and improving the effectiveness of social assistance programs to alleviate the economic burden of healthcare costs for individuals with low incomes.
  3. Government Investment in Healthcare: The findings underscore the importance of increased government spending on health. Policymakers should prioritize allocating adequate resources to the health sector, considering its direct correlation with improved healthcare access and affordability across different income levels.
  4. Promotion of Health Education and Awareness: To address disparities in health expenditure patterns, there is a need for comprehensive health education programs. These initiatives should focus on increasing awareness about preventive measures, healthy lifestyle choices, and the importance of early intervention, thereby reducing the overall healthcare burden.
  5. Public-Private Partnerships: Collaborative efforts between the government and private sector can enhance the efficiency and effectiveness of healthcare service delivery. Encouraging public-private partnerships can leverage the strengths of both sectors to address gaps in healthcare infrastructure, accessibility, and quality.
  6. Research and Data Collection: Continuous research and data collection efforts are essential for monitoring trends in health expenditures and income elasticity. Establishing a robust data collection system will provide policymakers with real-time information, enabling them to make informed decisions and adapt strategies to evolving healthcare needs.
  7. Capacity Building in the Healthcare Sector: To improve the overall quality of healthcare services, there should be a focus on human capital development. Investments in healthcare workforce training, education, and skill development will contribute to a more competent and efficient healthcare system.
  8. International Collaboration and Aid: Given Nigeria’s position as a developing country, international organizations and donor agencies should continue to provide support and resources to strengthen the healthcare sector. Collaborative efforts can enhance the implementation of effective policies and interventions, ensuring sustainable improvements in health outcomes.


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